Breathtaking Volatility!

Posted on by George Mahfouz

Breathtaking volatility has stormed the markets, especially since the war began. The currently vol has produced 1000 point swings in the Dow Jones Industrial Average (see chart here), this while the Nasdaq Composite soared over 750 points yesterday (see chart here). A 750-point day in the Nasdaq Composite is rare. The S&P 500 (see chart here) also has been whipped sawed as of late, while the small-cap Russell 2000 (see chart here) broke its 200-day moving average (click here) on Monday but reclaimed it the very next day. Remember the 200-day moving average is considered a major support line and no one who is long the market wants to see that support line fail.

In March, the key indexes also entered into correction territory by dropping over 10 percent from their all-time highs that were put in earlier in the year. A 10 percent drawdown is considered a “correction” while a 20 percent or more draw down is considered the beginning of a bear market. Luckily for the longs, the bleeding stopped in the 10 percent zone. So how did the selling pressure stop? The simple answer is our government came out and stated that they anticipate pulling out of the war in Iran in the next few weeks or so. Then after yesterday’s rally off the lows in the after-hours session the White House announced that the President is going to address the nation tonight regarding the war. This was enough for the rally to continue today as all the major averages added on to the gains made over the past two sessions.

So where do we go from here? I think a lot depends on what is said in tonight’s address to the nation and then how much investors believe what is said. In a geo-political crisis, investors and especially fund managers understand that things can change on a dime. What I hope for is concrete evidence that a cease fire will occur and that the healing can begin. In the meantime, I am remaining cautious until all the smoke clears.

Good luck to all 🙂

~George

Hot Inflation Number Spooks Markets!

Posted on by George Mahfouz

On Friday stocks took it on the chin as a hot inflation number spooked the markets! The latest producer price index report which measures wholesale inflation came in on Friday much higher than expected (click here). This was enough to send the Dow Jones Industrial Average (see chart here) down over 500 points on Friday, while the S&P 500 (see chart here) pulled back 30 points. The Nasdaq Composite (see chart here) also fell sharply giving up 210 points and the small-cap Russell 2000 (see chart here) settled down 45 points to close out the month February.

So why the negative tape? Inflation is one of the two pillars in the Federal Reserve’s dual mandate on interest rates. The Fed has made it clear that it will not lower interest rates should inflation continue to rise. This hot inflation number is not what investors wanted to see hence the sell-off in the markets on Friday. The other pillar in the Fed’s mandate is a strong job market. Well, here is the catch 22, the job market has been obliterated over the past year and this calls for the Fed to lower rates to stimulate job growth. Rates have been lowered over the past few months, but the Fed also made it clear that no more interest rate cuts will occur until inflation gets under control. Not an easy backdrop for the Fed to navigate.

As I look at the technical shape of the market, I am a bit concerned here in the short term. Friday’s selloff was enough to send the major averages below their 50-day moving averages. What’s more with Iran being bombed over the weekend and a new war being started this will create even more volatility which will most likely send stocks even lower. There are some supports zones including the 200-day moving averages of the indexes, albeit the 200-day M/A’s on the averages are much lower. What I have learned over the years is patience over panic while having protective stops in place (click here).

Good luck to all 🙂

~George

A Strong Start!

Posted on by George Mahfouz

The stock market had a strong start to the year; however, the back half of the month was more volatile and capped the monthly gains. Out of the major averages, the small-cap Russell 2000 (see chart here) was the clear winner gaining over 5% in January. The Dow Jones Industrial Average (see chart here) advanced 1% while the S&P 500 (see chart here) eked out a 1/2 percent gain, however, the Nasdaq Composite (see chart here) closed the month with a slight loss.

I am not sure what to make of the markets here in 2026. From gold and silver going parabolic then subsequently crashing (click here) to Bitcoin losing over 30% from its all-time high, to the bond market trying to find its footing! It’s no wonder volatility began to spike as January ended. Pundits are pointing to the geo-political risks that are seemingly hitting the headlines daily, to our own country’s divisions that are increasing on the daily, to the Federal Reserve standing pat on interest rates and now ushering in a new Fed Chairman. How in the world can any analyst have the proper visibility as to where the markets are headed this year.

One way to shuffle through all the noise is corporate earnings. We are in Q4 earnings reporting season and so far, we are seeing broad strength in company earnings. Of the S&P 500 companies that have already reported their Q4 results, we are seeing double digit year over year growth which is a metric that investors can rely on. What I am cautious about in the short-term is the unpredictability of foreign and domestic policies. From one day to the next you never know what is going to come out. However, what impresses me is the absolute resiliency of the stock market. Recently have witnessed an invasion, threats of war, increasing domestic infighting, the Federal Reserve forthcoming changing of the guard and yet the markets remain near all-time highs!

Let’s hope soon that the political and economic backdrop comes together sooner rather than later so we can have more clarity as to how the rest of the year for the stock market will turnout.

Good luck to all 🙂

~George

Gold & Silver Stole The Show!

Posted on by George Mahfouz

Despite the overall markets booking impressive gains in 2025, it was gold and silver that stole the show. Gold (see chart here) went up and eye-popping 65% last year, while silver (see chart here) booked an unbelievable 135% return in 2025. That’s right, 65% and 135% annual returns on these precious metals (click here) which also set all-time highs. This type of parabolic move in gold and silver has not been seen in decades.

The overall markets also posted double digit gains with the Dow Jones Industrial Average (see chart here) gaining over 13% on the year, the S&P 500 (see chart here) booked a 16% plus gain, the Nasdaq Composite (see chart here) gained 20% and the small-cap Russell 2000 (see chart here) closed the year up 12%.

Needless the say the bulls were very happy with how the markets fared last year. As we head into the new year, I am looking for a similar backdrop at least at it pertains to the overall markets. In December, not only did the Federal Reserve cut interest rates they moved from quantitative tightening (QT) to quantitative easing (QE). This move essentially is going to flood the system with liquidity and capital flow that will move into the markets over the course of time. I know we are near or at record highs but there is an old saying on Wall Street and that is “don’t fight the Fed”. Meaning, when the Federal Reserve begins to implement accommodative policies such as moving from “QT” to “QE” markets typically respond favorably.

Make no mistake there are still risks out there from the geo-political backdrop to the instability out of Washington D.C. Without question when this volatility comes in and it will, the markets will act accordingly. So as much as this bull market can still run, I expect dramatic selloffs along the way.

Wishing everyone a safe and most prosperous New Year 🙂

~George

A Volatility Spike!

Posted on by George Mahfouz

A volatility spike in November spooked plenty of investors which sent the markets into a tailspin! Volatility (see chart here) woke up last month as the markets digested the constant news flow and fears of an A.I. bubble (click here). This fear also spilt over into the crypto space where we saw Bitcoin, Ethereum and other Altcoins crash as much as 35% last month. For crypto, this is not an unusual drawdown, many times over a 30 plus percent correction has occurred in this sector. What’s different this time was the fear mongering over an A.I. bubble which has been a daily occurrence. This dynamic sent the tech sector down as a whole while also dragging crypto coins and crypto related stocks with it.

What was good to see for the bulls last week was the rally that occurred during the Thanksgiving holiday shortened trading week. This rally which has provided some calm to the market has once again taken the S&P 500 (see chart here) close to its record high. I was just happy to see a short-term bottom seemingly put in from last month’s sell-off.

As we enter the final month of the year the question now on every investor or traders mind is “can the markets muster up a Santa Clause rally?” Each year this is what the bulls hope to see and that is a year-end rally that takes stocks higher. The case for a Santa rally can be made. First, we have the Federal Reserve Open Market Committee interest rate policy meeting coming up on December 9th & 10th. All eyes and ears will be on this meeting to see not only if the Fed will cut interest rates, but even more so, the messaging and tone that comes out of the meeting on future rate cuts. One could say it was the hawkish comments (click here) made by the Federal Reserve chairman Jerome Powell that spooked investors which then spooked the markets and spiked volatility. In the last Fed meeting Chairman Powell stated there was no assurance of a December rate cut and that they will rely on the economic data to provide the necessary guidance as to cut or not.

Suffice to say, the economic data coming out continues to favor a cut in December in which inflation seems to be at least pausing while the unemployment rate is going higher. These are the two key factors in whether the Fed will cut rates again in December.

Good luck to all 🙂

~George

 

Not So Fast…

Posted on by George Mahfouz

Not so fast was the message that Jerome Powell signaled in last week’s Federal Reserve policy speech. Yes, the Federal Reserve cut the benchmark interest rate by 1/4 point to the 3.75-4.00 range which is what the market expected. However, after cutting the benchmark rate, Chairman Powell took to the podium (click here) and commented “there is no assurance that a December rate cut would occur” which immediately sent the stocks and the crypto market lower. Investors were caught off guard that the Chairman guided in this manner. In fairness to the Powell’s updated guidance, he also stated that because of the government shutdown there are no government economic data reports being released for the Fed to base any future decision on further interest rate cuts which makes sense.

What makes more sense is that Congress comes together now to reopen the government for all the reasons we know, including the restart of key economic reports that are issued by the government. How in the world can the Federal Reserve base policy decisions when they do not get the data they need from the government to assess the current state of the economy?  Investing and making investment decisions is already a complex process and the last thing we need is the leadership of this country to make it even more complex. Let’s hope Congress can come together sooner than later and reopen the government.

The good news is that the Fed did cut rates last week and this should bode well for the equity and crypto markets. Couple this with a better-than-expected Q3 earnings reporting season from corporate America and we should rally into year-end, especially if the government reopens. There are other factors at play such as coming to an agreement with China on trade and continuation of corporate earnings growth. Should all these factors align, then I would not be surprised to see a year-end rally.

Of course there is no guarantee that everything will align by year-end but despite the current uncertainties that we face what is impressive to me is that the Dow Jones Industrial Average (see chart here) the S&P 500 (see chart here), the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) are still trading near all-time highs.

Good luck to all 🙂

~George

Same Old, Same Old…

Posted on by George Mahfouz

It’s the same old, same old for the stock market. New record highs were set today on the S&P 500 (see chart here) and the Nasdaq Composite (see chart here)! Wait a minute, didn’t the government partially shutdown earlier this week? And yet the markets are still hitting all-time highs! Well hopefully the gov. figures this out as quickly as possible so that what is shut down can reopen. As the S&P 500 and the Nasdaq hit all-time highs today, both the Dow Jones Industrial Average (see chart here) and the small-cap Russell 2000 (see chart here) are within striking distance of their respective all-times highs as well.

So, what in the world is going on with our markets? For starters, corporate earnings for the most part have exceeded expectations up to this point despite the swath of tariffs that have been imposed this year. Secondly, the Federal Reserve cut interest rates last month and have signaled they are prepared to reduce rates further if needed. From the looks of things, lower rates are becoming more obvious as the job market continues to struggle. Normally, I would be concerned of how frothy the markets look and there are pockets of the market that are frothy. However, if corporate America continues to deliver better than expected earnings, coupled with a more accommodative Federal Reserve, the chances of stocks going higher into year-end is a strong possibility. I am not suggesting this will be the case, but I am beyond impressed with how resilient the stock market continues to be.

As I look at the technical shape of the key indexes the Dow Jones Industrial Average (see chart here) and the Russell 2000 (see chart here) are comfortably trading above their 20-day, 50-day and 200 day moving averages. Furthermore, both indexes are below the 70 value level of the Relative Strength Index aka the RSI. The 70-value level of the RSI is considered entering overbought territory. So, it appears that these two indices have room to run. A bit of a different story with the S&P 500 (see chart here) and the Nasdaq Composite (see chart here) whereas today both have tapped the 70 value level of the RSI. Please note that with the RSI  it is not uncommon for stocks or indexes to go past the initial overbought level of 70 and proceed to as high as 80 and in some instances the 90 value level of the RSI. An 80 and especially a 90 value level is viewed as extremely overbought according the RSI principles. No matter what the case is, this bull market seemingly is not tired yet.

Good luck to all 🙂

~George

Broken Records, Literally…

Posted on by George Mahfouz

Records continue to be broken as both the Dow Jones Industrial Average (see chart here) and the S&P 500 (see chart here) set records highs yet again last week. Yes, what typically is a softer month for stocks these major averages ignored history and recorded all-time highs. The Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) lagged a bit, but still is within striking distance of their all-time highs.

With all the uncertainty out of Washington, whether it’s the ongoing tariffs saga or the continuing demands directed at the Federal Reserve, how is it possible that index records are continuing to be set? One factor is the Federal Reserve is changing its tone on interest rates. The pressure has been on the Fed to start reducing rates since the beginning of the year. The Federal Reserve has a dual mandate pertaining to interest rate policies and that mandate is jobs and inflation. Unfortunately for the Fed, they are in a pickle. On one hand the job market has deteriorated over the past months, however, inflation continues to tick up. This is why the Fed has had their hands tied so far this year. But with the latest dismal job report that was issued in August, this has tilted the Fed to change their guidance to a more dovish tone. The markets have certainly has responded as evidenced by the new records that the Dow Jones Industrial Average (see chart here) and the S&P 500 (see chart here) have set.

Speaking of the jobs report, the August jobs report is schedule to be release on Friday September 5th. All eyes will be on this report which should cement rate cuts. If we see an even weaker than expected number, this could case the upcoming rate cut to be even more aggressive than the street is expecting. Whatever the case may be, I expect a volatile week ahead for the markets with plenty of opportunities.

Good luck to all 🙂

~George

 

Here We Go Again…

Posted on by George Mahfouz

Here we go again with more tariffs and on Friday, we also got a very weak jobs report. The markets reacted as they should have, especially after a rip-roaring record setting month of July that stocks enjoyed. On Friday the Dow Jones Industrial Average (see chart here) fell over 500 points, the S&P 500 (see chart here), the S&P 500 (see chart here) dropped over 100 points, the Nasdaq Composite (see chart here) fell over 400 points and the small-cap Russell 2000 (see chart here) closed the month of July down 45 points.

Now let’s add some perspective to this. The stock market has been on a tear since the bottom in April (see last month’s blog here). The markets not only recovered all its losses from the initial tariff fiasco earlier this year but went on to make all-time highs yet again in July. However, as the tariff deadline of August 1st loomed in the background, all heck broke loose with an expanded version of these tariffs in some instances along with a dismal jobs report that was also issued on Friday. Hence, a noticeable market sell-off ensued. To me all this heated market needed was a reason to sell-off and it got that on Friday.

Now looking ahead, where do we go from here? We needed a healthy market pullback for the uptrend to continue. Market participants have become so used to seeing markets going up and up with no end in sight. This is an unrealistic expectation and without healthy pullbacks, the market could set itself up for an outright crash which nobody wants to see. Now I don’t like what I saw in the jobs report, nor the increase in tariffs, so now I think the Federal Reserve may soon have enough data to start lowering rates. This is what the markets want to see and that might be the case sooner than later.

From a technical point of view, the aforementioned indexes finally came out of extreme overbought conditions according to the relative strength index aka the RSI to where now there could be some select opportunities to consider.

Good luck to all 🙂

~George

All-Time Highs Once Again!

Posted on by George Mahfouz

Stocks and key indexes hit all-time highs once again! The S&P 500 (see chart here) and the Nasdaq Composite (see chart here) hit record highs yesterday. It’s astonishing to me that despite the current geo-political backdrop, the continuing uncertainty from the tariff’s initiative and the political jockeying that is a constant, two of the key indexes hit all-time highs yesterday. However, the Dow Jones Industrial Average (see chart here) and the small-cap Russell 2000 (see chart here) still have work to do before they see their new all-time highs. That’s if they see their all-time highs.

In the past I have seen parabolic moves when major averages or individual stocks go up day in and day out. There are a lot of factors as to why prices go to extremes and here are a couple of examples; there is what is called “the fear of missing out” from retail investors where retail investors try to ride the trend and, in some cases, blindly. Another example is from an institutional standpoint and that is a term that is called “painting the tape”. Painting the tape refers to institutional money managers bidding up stocks into the end of a quarter, so their books reflect an even higher positive return and the end of a given quarter. Whatever the case may be, this is yet another impressive rally that we have witnessed despite all the market headwinds I spoke to above.

As I look ahead here in July there is so many different dynamics that will unfold that will certainly impact the markets. Let’s start with the Q2 earnings reporting season. Now that the 2nd quarter of the year has concluded, companies will start reporting their Q2 earnings results here in July. No question once earnings reporting season begins investors will be watching and listening closely as to how corporate America’s earnings are being impacted by the newly issued tariffs. I am expecting a cautionary tone from these companies as their CFO’s begin to model in how the tariffs will adjust their future forecasts. Then we have the geo-political backdrop and the uncertainty there, especially now with the new Iran – Israel conflict. Finally, there is a bill in Washington that is being debated as I type, who knows how that will end up?

I think it is safe to say that we are going to be in for a wild ride in the coming weeks and months. Good luck to all 🙂

~George